I recently received a mailing that advertised a financial seminar promising the usual things: lots of additional income, debt freedom in under 4 years, etc., etc. I attended a 2 hour presentation by this company called Advantage Financial Group. The company buys homes that are in foreclosure and rents it out to the current occupant who then have the option of buying it back when their credit has improved. To do these real estate deals, they need individuals to hold the mortgages on these houses, they claim they are not allowed to hold onto regular mortgages as they are a corporation. They claim this is a win-win-win for all concerned since you get a share of the rent + home value appreciation, the company gets a share of the rent plus home-value appreciation and the owner/occupant gets to live in the same home and rebuild their credit.

They claim that your upfront investment/cost for this entire scheme is $0 (which is true since I got out of the whole thing without any monetary cost). But there are a few troubling aspects to this program that you need to keep in mind before you decide to go with it.

First of all, you have to open a Variable Universal Life insurance policy with a company that Advantage recommends and that will hold pretty much all your income from this scheme. They claim that this has tax benefits and is part of the "financial plan". In general, these variable life policies are bad deals because of the fees and other costs associated with them. But if you are going to put only your additional income from this scheme into this policy, then it is still no money out of your pocket, but I would have preferred a different savings vehicle.

Secondly, the company CEO, Lee Loomis has very strong opinions, but does not back these up with very sound analysis. He is strongly against 401k's and IRA's. In these seminars, he goes around showing charts of how you save a little in taxes now, but pay a lot more later (which is true, but the point is not how much you pay in taxes, but how much you have left at the end of the day). I have my own analysis, which I believe is done the correct way, that shows (as most mainstream financial planners will show) that putting money in an IRA or 401k is much better than putting it in a taxable vehicle or even in a tax-advantaged vehicle like a variable universal life policy. Similarly, he has strong opinions about building up home equity (he claims that building up home equity is a waste since the money can be put to better use earning more money). He is in fact an advocate of negative amortization loans and other products that can actually keep you in debt longer, but one of his opinions is also that it does not really matter if you are in debt. He also has strong opinions about the stock market (does not acknowledge that over the long term, it is a pretty safe investment if you have the discipline to stick with it) and on and on.

On top of being very opinionated, this person does not brook any dissent whatsoever. To explain this, let me get to what happened about 3 weeks after I attended the seminar. I was vaguely interested in the scheme since it did not involve me putting up any money upfront. I wanted to get to the inner workings and was going to go with the scheme unless it involved putting my current financial plan in serious jeopardy. So, I cooperated with these folks and applied for the insurance policy (had to undergo a physical for this), opened multiple bank accounts as they required me to do, collected all my financial papers from the past two years (W-2's, tax returns, pay stubs, home mortgage statements, bank statements, 401k statements, invest account statements, etc., etc.) and set up an appointment to actually meet one of their financial planners for further action.

Today morning, I went to their offices and met with Lee Loomis himself. He looked at my paperwork and started off on the wrong foot by claiming that I was lying about my income. He said the income I was reporting in my tax return was not the same as what I was claiming in his worksheet. I explained to him that the income I reported in my tax return was after 401k deductions and other before tax items were taken out. I then took out a current pay stub, multiplied the gross income reported on it by 24 and showed him that it was the same income as I claimed on his worksheet. This is pretty basic stuff and any person who has filled out a couple of tax returns in his life knows that the number that goes on your tax return is not your total gross income. This did not inspire much confidence in this person's financial acumen or knowledge.

Then, he came to a line in the worksheet where I showed that I had some credit card debt and the monthly payment I was making on that debt. I said I had that debt only because I got a good interest rate from the credit card and decided to use that instead of money from my home equity line of credit because the interest on my HELOC is higher. I don't use that credit card for any other purpose, so I don't carry any high interest credit card debt at all. But he started multiplying my monthly payment by 12 and claimed that that was how much in interest I was paying for that credit card debt. I tried explaining to him that the monthly payment included the minimum payments due for the card and so it was both principal and interest (and obviously, my outstanding balance on that card does go down each month and I know from the statement exactly how much in finance charges I am paying and how much of the minimum payment goes towards reducing the balance). He got very rude at this point and started shouting that I was not supposed to try explaining to him how credit cards work.

So, I said, "I guess we have a difference of opinion here". He glared at me for a few moments and then with no warning, he just tossed my paperwork across the table to me and said, "we are all done here.". He then had me escorted out of the office.

I will let you draw your own conclusions about this outfit, but here is my take on it. If at all this scheme actually makes money for anyone, it is probably not anywhere close to the kind of money that is shown in the slick presentation during the seminar to bait people. Most probably, the scheme ends up losing money for most people and because of the complexity of the process involving multiple real estate deals, cash value accumulation in a life insurance policy, etc., most people do not even realize it. The financially savvy are most likely to identify the problems if they are let into this scheme, so I am guessing I got shown the door for being too financially savvy. If that is not the case, this scheme is nothing but a cult and Lee Loomis is the God of this cult. You disagree with him and you are not worthy of joining the cult. They want only true believers who will jump off the cliff after Lee Loomis when he orders them to. If either of these scenarios appeals to you, you should check this company out, otherwise, you have hereby been warned. Enough said.